07 July 2008

IP & p2p: Part 2General Market Structure

So, having gone thru the lesser points, let's examine the main points of JDG. First, the RIAA and MPAA are organizations devoted to the preservation of the big companies' position in their industries. Second, that the artists will benefit from p2p. I'm right there next to JDG in his first point, but the second does not necessarily follow.

In general, there are four groups which are involved in this market adjustment. There's the creator, the distributor, the merchant, and the consumer. It's a fairly typical market setup which could be applied to most items in a capitalist market. The major difference is that in order for intellectual property to be profitable enough to produce an artificial monopoly must be created. If it is not there is no incentive for distributors and merchants to become involved and product flow stops or is seriously curtailed.

Why? Glad you asked. Distributors in this system are also the people who bankroll the creation of content. They identify a potentially lucrative creator; they do their best to improve the creator's product; they promote the creator; they bite the bullet when the majority of creators fail; and they exploit those creators who succeed. In this system both the creators and the consumers are exploited as much as possible to maximize profit for the distributor and merchant. There's never been too much the creators have been able to do about this process (except for a select few who really became BIG). And, to be truthful about it, creators need the distributors in order to have their shot at becoming BIG. Sure, they can gain traction in a geographical area, or have a following among a segment of society, or they can gather a following on the internet, but those are usually beginning steps. The distributor is needed to make them nationally or internationally renowned. On the other hand, a few years back, the consumer found himself in a situation where he didn't have to put up with as much exploitation as before.

The web brought the consumer the ability to download without cost. Someone out there would upload an item and others could download it without paying a skinny nickel. Sure, some of this had been previously available via bbs systems, but the web brought wider availability. Additionally, both technology and software increasingly made this an increasingly attractive alternative for consumers.

In other words, the artificial monopoly was broken. Artificially inflated prices led to consumers (former customers) forgoing the cost of purchasing IP items and instead downloading them without cost. This did not directly affect the creators and was crushing to the brick and mortar merchants (seen a record store chain anywhere lately? - although, to be fair the rise of Wal*Mart and Best Buy probably also helped in their demise). Yet, the conflict which developed did not involve the merchants. The conflict is between the consumer and the developers. And we all root for the consumer, the little guy, us.

Unfortunately, it's not that simple.

The industries have often reacted horribly. Whether they are acting as groups (Business Software Alliance, RIAA, MPAA, etc.) or as individual companies (Viacom) they've done things which have seemed almost insane as they've thrashed around fighting the changing market with every shred of their beings. They've pushed for repressive laws to be enacted. They've sued various consumers for much more than the damage that particular consumer could possibly have caused. They've sued companies out of existence. Sometimes the industries score victories (Napster), but generally they have been swimming against an incredibly strong tide. All of this done, as their PR spin would have it, on the behalf of the creators. Nevertheless, while at least the successful creators are along for the ride, the truth is that the distributors are looking out for their own bottom line. Eventually, although they get pushed there kicking and screaming, they all seem to try to make some accommodation.

Still, after all the poor behavior on the part of the industries, it is in the best interest of the consumer for them to continue to operate. We need movie companies making potential summer blockbusters, publishers printing books, television channels making shows, etc. and the ugly truth is that for them to make them they must make profits. The even uglier truth is that for this to happen we must pay for things.

Hopefully, later in the week I'll have time to opine as to how all this has played out / is playing out in several industries: software, music, TV, movies, books, and any others I might think of . . .

Disclaimer

In case anyone out there needs this warning: This ain't legal advice. Everything in the blog is off the cuff and no one goes back and reads all the cases and statutes before blogging. The law may have changed; cases misread and misunderstood two years ago can still lead to a clinging misperception. Courts in your county, city, or State probably don't operate as described herein. Feel free to be inspired, but YOU MUST ALWAYS DO YOUR OWN RESEARCH OR HIRE A COMPETENT ATTORNEY TO DO SO because I haven't.